HSBC set a new record low rate today but a top mortgage adviser doesn’t expect more rate drops to follow.

The Real Estate Institute of New Zealand (REINZ) has called for a review of the current loan-to-value ratio limitations, as its latest data has revealed a significant drop in the number of properties sold nationwide last month.

The data found the number of sales across New Zealand in July fell by a quarter (24.5%) when compared to the same time last year, and the number of properties sold in Auckland fell by 30.6% (for the same period).

From a national outlook, these figures represent the lowest number of properties sold in a non-Christmas month (i.e. December/January) since August 2014.

REINZ chief executive, Bindi Norwell, says two key reasons for the drop in house sales are the tightened lending criteria of the banks and the LVR restrictions in place. “This creates an intimidating barrier to entry to the real estate market, particularly for those saving for their first home.

“The LVR restrictions have done their job of slowing the market, but now it seems they are acting as a handbrake which is why REINZ is calling for LVRs to be reviewed for first time buyers,” she says.

“No matter where we are in the country, agents tell us that there are a good number of buyers out there, but that these two issues are impacting both investors and first-time buyers alike.

“When you throw in an election, winter, school holidays and one of the wettest Julys on record, it’s little wonder the number of properties sold last month fell so significantly.”

No price drop in Auckland anytime soon
Median house prices for July rose in all but four regions across the country, compared to the same time last year, (Auckland – down 1.2% to $830,000, Bay of Plenty – down 1.2% to $489,000, West Coast – down 23.5% to $195,000 and Canterbury down 2.3% to $420,000).

The national median price increased by 3.4% year-on-year to $518,000 (up from $501,000) and the national median price, excluding Auckland, increased 6.1% to $415,838 year-on-year.

Record median prices year-on-year hit four regions – Northland up 23% to $455,000, Hawke’s Bay up 25.8% to $400, 000, Nelson up 20.2% to $493,000 and Otago up 15.3% to $400,000.

“With the majority of the country experiencing price rises and four regions experiencing record prices, it shows that demand is still strong across significant portions of the country,” said Norwell.

“Most notably this growth is seen in provincial towns rather than the bigger cities - much of this can still be attributed to people looking to exit the bigger cities for more affordable and relaxed lifestyles.

“While the median house price for Auckland has fallen slightly, the housing shortage coupled with the increased population growth means the City of Sails is likely to be protected from significant price decreases in the short term.”

Inventory rising
Inventory levels continue to increase, with the number of properties available for sale nationally up by 1,441 (7%) compared to 12 months ago.

The number of properties for sale in the Auckland region increased by 2,648 (49%) and excluding Auckland, the number of properties for sale fell by 1,207 (-8%).

Compared to July 2016, the number of listings rose 19% in Waikato, 11% in Wellington and 10% in the Bay of Plenty. The regions with the biggest decrease in inventory were Southland (-32%), Otago (-25%) and the West Coast (-23%).

“Auckland is not short of properties available for sale, given that the number of properties available has increased by nearly half,” said Norwell.

“The issue is purchasers being hamstrung by finance and LVR restrictions. However, in the lower South Island, listings are down making it even harder for investors and first-time buyers to compete for properties.”